The business behind the show

Land of the cuts: Universal Pictures looks to scale back producer deals to reduce costs

December 11, 2009 | 4:53
pm

Universal Pictures has asked its three top movie suppliers -- Imagine Entertainment, Working Title and Stuber Productions -- and all of the other producer deals it funds to cut overhead and economize in order to bring their operations in line with the tough economic realities of the movie business, according to a person familiar with the situation.

This person said that some of the studio's production deals (it has between 15 and 20) will not be renewed once those contracts expire. Others, with longer-term agreements, including Imagine, Working Title and Stuber, have agreed to find ways to reduce operating costs, watch expenses and find efficiencies in their business in the new year and going forward. Universal cannot mandate cuts because of existing contractual obligations. So exactly what form the reductions take are strictly voluntary and will differ among the companies.

A year ago, Universal underwent a studio-wide belt-tightening by cutting costs and reducing its head count by 3% -- losing about 80 employees -- as part of parent company NBC Universal's mandate to slash overhead throughout its divisions by $500 million.

Recently, NBC Universal chief Jeff Zucker has been on a tear about cost cutting at Universal, after the studio had a horrible year at the box office with flops such as "Land of the Lost" and overspent on a number of big-budget productions, including 2010 releases "Robin Hood," "The Wolfman" and "Green Zone."

Universal Studios President Ron Meyer recently fired his top movie lieutenants in hopes of turning around the company's fortunes.

With a pending deal to sell controlling interest in NBC Universal to cable giant Comcast Corp., Universal is under increased pressure to further reduce costs and show its soon-to-be-owner a leaner operation.

Universal is not the only studio looking to shave overhead and costs in recognition of the changing economic climate where DVD sales, which for years propped up the movie business, have fallen off a cliff as consumer buying habits shifted.